Breaking up big banks: good or bad for financial jobs?

Lots of talk regarding breaking up the big bank recently. Sandy Weil is now on board as a supporter.

Suppose it were to happen at any level. Would this create a need for more jobs?

Seems like as banks get bigger they consolidate however breaking them up might create more redundancies that would be needed albeit more competition might mean less profits for each. Pay might be pressured to go down?

Interested in your thoughts!

Hard to say. Broken up banks would have fewer economies of scale, so overhead would increase. However, broken up banks would also escape many regulatory requirements imposed on big banks. So, they would save some work there.

Compensation would probably depend on profitability. Broken up banks would be able to take more risk, since there would be less concern about being “too big to fail”. So, some components of broken up banks might become more profitable - MS is a good example. Then again, there is the increased overhead, and smaller bank organizations would decrease the extent to which banks would be able to cross sell or use big balance sheets to support certain businesses. So again, it’s uncertain.

Creating more jobs is not always a good thing, btw. It depends on whether that job is actually productive.

Back office and support function jobs may increase, because you lost scale. Margins would likely decline across the board, salaries overall would probably decline.

FoF jobs may increase as the number of players increase.

Also possible that companies will outsource back office, documentation, compliance, etc. For instance, rely on a special company that specializes in clearing.

But who are we kidding? This is not going to happen any time soon, if ever. Dodd Frank will take several years to interpret. After that going through the trouble of complying with hundreds of new regulations, who would want to go through the process again by breaking up all the companies?

Well, as it stands now, a lot of bank regulations are triggered by asset size. The smaller a bank is, the less impact there is to the insurance fund.

Somewhat related to that are hedge funds and such. One of my friends lost his job because the fund he worked for downsized AUM to avoid SEC filings and disclosures.

Downsized AUM? Did they give the funds back to investors? Couldn’t they create an offshoot company or fund so that the parent could still potentially profit?

in a real “free market” there would be less barriers to entry, greater competition, and more firms

Don’t confuse free markets with competative markets. They are not necessarily the same.